The view from downriver

With Pinnacle Entertainment here, downtown riverboats face an uncertain future.

Baton Rouge isn't big enough for three casino boats, according to industry watchers anticipating the Aug. 29 opening of L'Auberge Casino & Hotel. They predict the demise of one of Baton Rouge's two downtown boats, unless Pinnacle Entertainment's newest development on River Road at Gardere Lane can attract gamblers here like the city's higher ground did in the aftermath of Hurricane Katrina.

But James Rigot, general manager of Hollywood Casino, doesn't think L'Auberge will come close to that kind of growth in the gambling market.

“In my estimation, they'll have to grow it by 50%,” Rigot says, “and Mother Nature was only able to grow it by 40%.”

In the fiscal year ending in June 2005, casino revenue between the two boats was $199 million. It grew to $273 million the next fiscal year, following the storm. Revenue tapered off as people left Baton Rouge and now has remained close to $200 million the past three fiscal years.

The local numbers don't faze Pinnacle. The publicly traded six-casino and one-racetrack operation—not counting L'Auberge in Baton Rouge—is betting to become a beckoning riverboat for players between Lafayette and Mandeville, and down to Houma and New Orleans, who normally travel to the Mississippi Gulf Coast for frills-filled gambling entertainment.

“We don't feel, we know, there are customers that leave this area,” says Mickey Parenton, who is leading Pinnacle's opening of L'auberge Baton Rouge and who led the opening of Beau Rivage in Biloxi for another company. “We're clearly looking at ourselves as a potential regional destination. We really feel like we understand this market.”

In June, Hollywood Casino generated $10.3 million in revenue; the Belle of Baton Rouge Casino & Hotel generated $6.5 million in revenue. Meanwhile, L'Auberge du Lac in Lake Charles generated nearly $33 million in revenue. That Pinnacle operation remains one of the most successful in Louisiana and Parenton knows Baton Rouge's L'auberge won't match its take for one simple reason: Houston.

“That's what drives Lake Charles,” Parenton says.

Texas has no casinos, and high rollers and slot players from the Dallas area line up at the tills of Shreveport's casinos as well.

Pinnacle has an idea of what its take will be in south Baton Rouge, but it's holding that number close to the chest.

“We have a forecast, but we rarely ever share a forecast,” Parenton says.

Hollywood's Rigot is certain L'Auberge will push casino revenue in the city to more than $200 million. But all its bells and whistles won't be enough to keep three boats afloat.

“The market's soft, and it's been soft,” Rigot says. “We even saw this decline before the Great Recession. In my estimation, it's a two-boat market. That's the reality.”

Upping the ante

Experts say the gambling industry is no longer based solely on slots and table games and L'Auberge is following the new model. Forget the “romantic notion” of gambling on a three-floor riverboat, says economist Loren Scott. L'Auberge is rolling out a single-floor gaming area that will be ringed with dining and entertainment amenities that alone would attract visitors: a steak house, a sports bar and restaurant, a nightclub, a café, the token buffet, an indoors event center with 1,600-person seating for concerts, conventions and private events, and an outdoors concert area that uses the Mississippi River levee as a natural amphitheater.

Darius Rucker, whose band Hootie & the Blowfish topped the charts in the 1990s, will play the first outdoors concert on Oct. 12, the night before LSU hosts South Carolina in Tiger Stadium. Of course, there's a 205-room hotel with deck pool on the 12th story to accommodate visitors. L'Auberge plans to include high-stakes table games—minimum bets anywhere from $25 to $50, depending on business—and big-bill slots as the not-so-subtle stimulant that makes the whole resort whir.

“We'll play it out as we open up,” Parenton says.

With 550 acres at L'Auberge's disposal, the Pinnacle operation has plenty of room to stretch out around the three traffic circles it brought to River Road. But Parenton, for now, is mum about what that future development will include. When the casino resort was first proposed and required a referendum vote to allow a third gaming license operator in the city, Pinnacle mentioned building a golf course near the river's hard bend and adding other dining and entertainment options—possibly even another hotel.

Scott Dyer, a spokesman for Mayor Kip Holden, says he remembers talk of a subdivision possibly being in the future for the property.

The development stands in stark contrast to the blight that has beset the Gardere Lane and GSRI Avenue areas. But BRAC President and CEO Adam Knapp, says that could change once expected development in the River Road corridor between the casino and LSU fills out.

“I think you'll see a lot of investment that will drive community revitalization in that area,” Knapp says.

Based on the casino's forecasted payroll of $37.9 million for 1,300 workers, Knapp says, BRAC did a conservative impact study and found that the casino could support the growth of 645,000 square feet in commercial space over the next decade. The payroll alone could expand sales and property taxes by $3 million for city-parish government.

However, economist Scott doubts L'Auberge will have that much of an impact on job growth: “There will be some cannibalization from the other two boats.”

In 2008, Scott commissioned a study of Baton Rouge casinos and found that 90% of visitors to Hollywood and the Belle—based on license plate counts—are from the Capital Region.

“People don't drive past the New Orleans casinos, or the Lake Charles casinos, or the Shreveport casinos to come down here to gamble,” Scott says. “At least one, and possibly two boats, will go down. It almost depends on which one of them blinks first.”

Four years later, Scott stands by his finding that the Belle has better financial footing with its parent company, Penn National Gaming and could outlast Hollywood. But the final outcome will be as unpredictable as the river card in Texas Hold'em.

Scott predicts the loser will take its gaming license elsewhere, possibly Shreveport.

Let the chips fall

When Pinnacle first proposed building here, both downtown casinos hinted at replacing their 1994 boats with new vessels. But new ships never sailed. Both companies are now in the process of dressing up.

The Belle added free valet parking in June for guests. General Manager Patrick Browne says other upgrades include remodeling hotel rooms, improving air conditioning on the boat and the guest walkway, and improving the ramp for disabled guests.

“Unlike L'Auberge, our downtown property is convenient and smaller, where you get more for your money,” Browne says. “Our leadership team has been focused on operator excellence and improving guest service in all departments.”

Loyal guests, says Browne, will ensure the Belle's continued survival.

At Hollywood, the casino improved its accessibility, spending $7 million on a new underpass at the railroad tracks last year. It brought Boogie Nights to town. And it continuously rotates slot machines in and out for newer features.

“We just don't have a huge facility,” says Joel Loots, Hollywood's vice president of marketing. “We have a boat, we have a steak house, we have a buffet, and we have Boogie Nights.”

But that could all potentially change.

Still in play just north of Hollywood is the mixed-use center called River Park, proposed by developer Pete Clements, which includes an outdoor concert venue, two hotels, restaurants, shops and apartments. Clements split the $14 million tab for the underpass with Hollywood to provide access to the river.

“Obviously we'll be a beneficiary of being a close neighbor,” says Rigot.

Clements could not be reached for comment on progress at River Park.

While the city-parish bases its budget on conservative projections, some of the revenue comes from gambling taxes. The 2012 budget includes $6.2 million in expected casino revenue. City officials havent' expressed concern about whether one or both boats not surviving and had not much to say on the matter.

In fact, Davis Rhorer, executive director of the Downtown Development District, says the closure of one boat would not have a great impact on downtown. Gamblers don't usually walk over to Third Street and patronize restaurants and bars.

“A lot of times they don't interact with downtown,” Rhorer says.

But if only one remains floating, it will have the downtown conventions to itself.

“That gives them one piece of competitive advantage,” Scott says.

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